CREATION OF MORTGAGES LEARNING OBJECTIVES Describe the ways state laws define security interests in...
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Transcript of CREATION OF MORTGAGES LEARNING OBJECTIVES Describe the ways state laws define security interests in...
CREATION OF MORTGAGES
LEARNING OBJECTIVESDescribe the ways state laws define security
interests in mortgage contracts.Discuss how funds are allocated to mortgages in
capital markets.Distinguish between residential and commercial
property mortgages.
CREATION OF MORTGAGES
LEARNING OBJECTIVESIdentify the major clauses in mortgage contracts.Distinguish among valid, invalid, enforceable and
unenforceable mortgage contracts.Describe the process of mortgage default and
foreclosure.
THE MORTGAGE
The mortgage creates an interest in a property to secure the payment of a debt, or obligation.
Real estate financing involves two separate obligations:the promissory note, and the mortgage.
The borrower (mortgagor) gives the mortgage. The lender (mortgagee) receives the pledge.
Mortgage Markets
Primary Mortgage Marketlenders and borrowers
Secondary Mortgage Marketconduits, investment bankers and investorsmortgage-backed securities
Title and Lien Theories
Title-Theory Stateslenders receive title to propertypower-of-sale clause
Lien-Theory Stateslenders do not receive titleforeclosurerecourse and nonrecourse loans
Deeds of Trust
REAL ESTATE DEBT AND EQUITY MARKETS
Private Public
EquityIndividualsPension Funds
Equity REITSReal Estate
Corporations
Mortgage Debt
BanksInsurance Companies
Mortgage-backed SecuritiesMortgage REITs
THE MORTGAGE CONTRACT
Must have essential elements of a valid contract.Must be in writing and describe the property.Additionally, the mortgage instrument must:
identify the property rights being pledged,include the words of conveyance,include the signature of the mortgagor,be delivered to the mortgagee, and recorded, andcontain reference to the note, or obligation.
Common Mortgage Clauses
Acceleration clausePrepayment and late payment clauseDue-on-sale clauseInsurance clauseInterest escalation and adjustment clause
Typical Clauses in the Residential Note
The Date of ExecutedThe Name of Mortgagor and MortgageeAn Acceleration ClauseTerms of the LoanPrepayment and Late Payment PenaltiesEscalation Clause on Delinquent Penalties
MORTGAGE RELATIONSHIPS
Primary MortgagesJunior MortgagesWrap-Around MortgagesPurchase Money MortgagesLand Contract
Single-Family Residential Mortgages
Permanent FinancingconventionalFHA & VA mortgagesother government-supported programsowner financing
Construction Financingforward commitments (covered loans)open-end loans (uncovered loans)
ADJUSTMENTS IN BORROWER/LENDER RELATIONSHIPS
Mortgage SatisfactionMortgage Default and Foreclosure
delinquency and defaultdeeds-in-lieu of foreclosureequity of redemptionjudicial and nonjudicial foreclosurestatutory redemption